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China to raise retirement age as pension pressure mounts on economy

This decision comes as China's pension system, the world's largest with 1.05 billion contributors and beneficiaries, faces significant stress from demographic change

China, Chinese people, China ageing population

Image: Wikimedia commons

Nandini Singh New Delhi
China is poised to raise its statutory retirement age to address mounting pressure on its pension system, amid an aging population and shrinking workforce. The country’s retirement age, which has remained unchanged since the 1950s, is currently one of the lowest in the world — set at 60 for men, 55 for white-collar women, and 50 for blue-collar women. 

The proposed reforms are expected to gradually increase the retirement age to 65 for all citizens, with implementation anticipated over several years.

A long-awaited change
 

In a high-level meeting of the Communist Party Central Committee this July, China approved a plan to raise the retirement age, aiming to implement the reform by 2029. Officials described the process as gradual, with steps to be taken in a "prudent and orderly" fashion, allowing for flexibility. A report from the Chinese Academy of Sciences indicated that the final retirement age could be set at 65.
 

This decision comes at a time when China’s pension system, the largest in the world with 1.05 billion contributors and beneficiaries, is under significant stress due to demographic changes. The country’s population of 1.4 billion is aging rapidly, partly due to the one-child policy implemented from 1980 to 2015, causing a sharp decline in the number of working-age citizens.

Why is reform so urgent?
 

China’s aging population is a central issue driving these reforms. As of 2023, the country had 297 million citizens aged 60 and older, a number expected to surpass 400 million by 2035. Life expectancy has risen from 44 years in 1960 to 78 years in 2021, and it is projected to exceed 80 by 2050.

Experts warn that the current pension system, which is funded by a shrinking workforce, is unsustainable. Eleven out of 31 provincial jurisdictions in China are already operating pension budget deficits, and projections from the Chinese Academy of Sciences predict the system could run out of funds by 2035 if no changes are made.

A divided public response
 

The proposal has sparked significant debate across Chinese social media platforms. Some citizens support the change, pointing out that many Western nations, such as Canada, have retirement ages of 65 or older. Others, however, express concerns about job security and age discrimination, particularly in a culture that increasingly favours younger workers.

China’s notorious ‘996’ work culture, which refers to working from 9 am to 9 pm six days a week, has fuelled anxiety about the ability to work into one’s 60s. Additionally, women have traditionally retired earlier due to their roles in caregiving, and many are worried about how they will remain employable in their 40s and 50s, especially amid widespread age discrimination.

Worries about age discrimination
 

The job market’s bias towards younger workers compounds the anxiety. Many online commentators have highlighted employers’ preference for those under 35, with older workers often being overlooked for new positions. Ms Yang, an employee in human resources, echoed these concerns, noting that her company typically avoids hiring anyone over the age of 35.

This sentiment is shared by Emily, a legal professional in her 40s, who expressed fears about the new retirement reforms. She planned to retire at 50 but now worries about losing her job in her mid-40s. “If we can only retire after 65, what should we do with the remaining 20 years?” she asked, highlighting the uncertainty many Chinese workers face as they age.

 

Challenges of pension reform
 

Pension reform is rarely popular, and China is not alone in facing resistance to such changes. Stuart Gietel-Basten, a professor of social science and public policy at the Hong Kong University of Science and Technology, told ABC that pension reform tends to provoke a negative reaction worldwide, whether in France, Russia, or now China. Raising the retirement age, increasing taxes, or reducing pension payouts are all unpopular measures.

The rural-urban divide in China further complicates pension reform. Rural citizens, who generally have lower life expectancies and less access to healthcare, may be disproportionately affected. Life expectancy and access to pension benefits vary significantly between urban and rural areas, and while urban pensions in major cities like Beijing and Shanghai can range from 3,000 to 6,000 yuan per month, rural pensions are much lower, with the minimum set at just 123 yuan per month.

Could immigration be a solution?
 

Some experts have proposed immigration as a potential solution to China’s demographic challenges. A recent article in The Conversation suggested that an influx of young immigrants could help offset the aging population. However, Professor Gietel-Basten dismissed this idea, noting that "hundreds of millions" of people would need to migrate to China to have a meaningful impact. Additionally, immigrants would eventually age, contributing to the very problem they were meant to alleviate.

Other policy options
 

Raising the retirement age is just one of several strategies the Chinese government could employ to address its aging population. Experts suggest that a combination of policy changes will be necessary, including investments in gerontechnology to support older workers and improving healthcare access.

Gerontechnology, which focuses on the development of technology to assist elderly populations, could reinvent the nature of work in later life, making it less physically demanding and more accessible to older workers.

There is also speculation that China might encourage a culture of volunteerism, similar to the ‘barefoot doctors’ programme of the 1960s, where minimally trained medics provided healthcare in rural areas. A similar approach could see older citizens participating in community-driven support systems.

[With agency inputs]

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First Published: Sep 13 2024 | 12:45 PM IST

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